Seven and a half years after scribbling my first post on Evolving Excellence I'm moving – whether I'm moving on, moving up or just moving over remains to be seen, I suppose – but moving I am. From here on out you can find my stuff at:

The Center is an effort supported by a tech partner, iDatix, and the good folks there have given me free reign to write and post at my own discretion. While you will find it dominated by my work as we get things launched, the plan to is keep a judicious eye on the available literature, videos. etc… and have it be a source of the very best in manufacturing management information.

The run at Evolving excellence has been a great one, and I will always have a warm spot in my heart for Kevin and the EE readers who made it possible. Thank you so much. I hope to see you over at the Leadership Center.

I recently received an email from a guy challenging the legitimacy of organizing into value streams and lean accounting. The linchpin of his argument: "I can't find anything saying Toyota has done any of that". This seems to be a fairly common view – something of a Toyota acid test for all things lean. Of course, at the same time the most common arguement offered up in resistance to lean is, "We're different – we aren't like Toyota."

Seems to me if we want to get all Toyota-y about things we have to take Shingo's words to heart when he wrote, "We have to grasp not only the Know-How but also Know-Why."

Most plants are very much unlike Toyota plants, because making cars has some very unique characteristics – like one value stream per plant. That's the nature of the auto industry. It's tough enough to make one type of car, let alone making a bunch of them. When the auto companies make more than one model under one roof, even Toyota can only do it when the cars are very similar. They don't make full size pick-ups and small sedans on th same lines, or even in the same plant.

Most manufacturers make something with a lot fewer parts than cars; and they make more than one product type – hence the need for value streams. An auto plant basically has one big value stream map, and all of the costs in the plant are incurred somewhere along that map. Most plants – with multiple value streams – have a trickier challenge with costs: To figure out which value streams go with which costs.

In fact, there are a lot of things that are easier in a Toyota plant than in most plants – kanbans, for instance, and heijunka. When everything in the plant is flowing to one place – one assembly point – these tools are a whole lot simpler than when they can flow to multiple points with differing demand volumes and rates of demand variability. Doesn't mean the underlying principles don't apply – Shingo's "Know Why" – but it does mean the math and application techniques have to be different.

I wouldn't dream of taking anything away from Toyota. Making cars is tough, and their conjuring up the principles of lean changed the world. That said, however, using Toyota as the acid test for whether something is lean or not is rather naive and intellectually lazy.

In most companies and most plants, asking 'what would Toyota do?' is the appropriate question – not 'what did Toyota do?' And when you head down that path, you inevitably get to things like value stream organizational structures, lean accounting and a whole lot of other managerial and shop floor techniques that you won't find in a Toyota plant.

All over the country – all over the world, for that matter – managers are confronting year end surprises from annual inventory counts. Strenuous efforts to reach profit goals have been undone by inventory write-offs they never saw coming. Too late to do anything about it at this point, they resolve to take steps to assure it doesn’t happen again. How the problem is defined is the key to the whole matter.

The manager could assemble the staff and tell them, “We have to come up with a plan to eliminate these year end inventory adjustments.” Or the staff could be assembled and told, “We need to get inventory under tighter control in order to assure accuracy.”

The first approach defines the problem broadly, opening the company to a wide range of options – the best of which is to get rid of the inventory, thereby eliminating the problem all together. The second is based on the assumption that all of the existing processes are OK and the task is limited to controls over those processes.

As one CEO recently told me, how we define problems is 90% of the game. He is absolutely correct – maybe even conservative. Far too often we assume we know the root cause before we even get out of the starting gate. We assume that all of the existing processes, policies, procedures and so forth are necessary and inviolate, putting people into a very small box in terms of the range of solutions at their disposal.

Challenging people to reduce direct labor costs, or to cut material prices, rather than challenging them to improve profitability ignores the reality of integrated processes that cust across the business. It assumes the problem – and the solution – lies entirely within a particular functional silo.

Of course, as a consultant I hear this all the time. Would be clients call me asking for help with problems so narrowly defined that it is apparent they have already made assumptions about the root cause, and have limited the scope of recommendations from which they want me to make a recommendation. A typical one is a request for my help in their selection of an ERP system. They don’t want me to look at the underlying problem that led them to conclude that ERP is the solution. Typically they blew right past that step. When I ask them what the problem is they are trying to solve, a typical answer might be, ‘we built a second plant and now we are having problems delivering on time because our old system can’t support multiple locations’. My response is usually, ‘if you want me to look at your supply chain processes and help you solve the delivery problem, with more robust ERP as simply one option among many that might help, I will be glad to do so, but if you have already determined that all of your processes are fine and you simply have a computer problem then I am not the guy for the job. You need an IT consultant.’

Of course, how we define problems is not just a manufacturing issue, or even just a business issue. Husbands, wives and kids complain long and loud about their each other’s attitude or laziness in supporting each other in the execution of basic household chores, never thinking that the basic process for getting those chores done might be at the root of the problem.

Now would be a great time to take a long look at the problems the organization is tasked with solving in 2013. I bet most of those definitions doom the company to having this year look a whole lot like last year. Redefining the problem just might be the key to fundamentally changing the trajectory of the business.

The horrible shootings in Connecticut have set off another round of debates over the fundamental goals of a business – pitting financial gain against social responsibility. The core principles of lean – including respect for all of the people working for the business, true partnerships with suppliers committed to the same view of their people, creating genuine value for customers, and so forth – are very much built around the idea that the two are not mutually exclusive: The idea that the best way to make money for the stockholders is to take very good care of all of the stakeholders. Lean proponents believe that fairly, even well, compensated employees; suppliers sure they will be dealt with fairly if they invest in the long term health of their customers; customers who receive the most for their money; and communities living with assurance that local employers are long term residents will all go beyond the call of duty to assure the success of the business.

The alternative is the traditional economic view – that labor (the employees) and capital (the stockholders) are engaged in a zero sum battle with each other – that one’s gain is the other’s loss; that relationships with both suppliers and customers should be adversarial – again a sort of zero sum approach that a nickel negotiated away from a supplier or a customer is a nickel gained for the stockholder; that communities are sources of labor and infrastructure to be pitted against each other with the company to locate within the city limits of the lowest bidder for both.

The difference in views is very much a function of the time frame. The holistic, lean approach is a proven winner, but is a long term winner. Optimizing long term shareholder value often means sub-optimizing short term shareholder value. In publicly traded companies the long term view just isn’t in the cards. The costs of dumping an investment in one company and putting the money into another are just too low and the whole thing is structured to enable the trillions of dollars in the markets to lurch from one company to another in a continual quest for the best short term returns.

Lean literature is rife with advice on leadership, most of it assuming that lean is simply dependent on a CEO who gets it – and exhibits all of the qualities of some great historical leader. Middle management people often complain long and loud about the leader they work for not ‘getting it’, or being unwilling to demonstrate such leadership.

The reality, however, is that the CEO, unless he is a sole proprietor (or at least the majority owner) has a boss just like that frustrated middle manager. When that boss – the board of directors – hasn’t bought into lean’s long term, holistic philosophy, all of the high sounding leadership behavior in the world on the part of the CEO is unlikely to serve as the linchpin for lean success. He or she is simply not going to get the necessary support for that short term shareholder sub-optimization needed to get to ong term shareholder optimization.

It is not a coincidence that Toyota conjured up much of the lean philosophy as a family owned business, dominated by a patriarch in a position to do whatever he wanted to in the short term, without fear of shareholder backlash. It is not coincidental that Henry Ford bought out and booted out all of the other shareholders to clear the decks so he could double worker pay and halve prices the way he wanted to.

The ideal of mutually supportive goals between shareholders and stakeholders requires support from the top. Lean success trickles down and cannot be driven from the shop floor, or even the middle. The top means the top, however, and we can’t simply put the onus on the CEO when he or she is not really at the top. Certainly the CEO is uniquely positioned to educate and sell the board, but in the end, the real lean battleground is in the boardroom, rather than in the executive suite.

The good folks over at Bloomberg/Business Week wrote about Cisco’s failure to make good on their big investment in LinkSys. Cisco makes big, complicated gear to manage big complicated computer networks. LinkSys makes basic, cheap wireless routers you can buy at places like Walmart. The problem, they say …

“When tech companies that have been successful supplying enterprise customers with all manner of digital gear decide to go consumer, they usually hype the potential synergies, such as using components that go into both sets of products. Trouble is, those synergies rarely materialize, or are not enough to offset other problems. You see, consumer electronics businesses operate on razor-thin margins, yet still require an investment in R&D as well as heaps of marketing dollars. You need to sell humongous volumes through retail just to make the effort pay off.”

They – B/BW and I believe it is a safe bet, Cisco – missed the point. For one, the problem has nothing to do with ‘tech companies”. History – especially recent history – is littered with the wreckage of companies of all sorts that sought to leverage their product and/or process technology by getting into a new market … companies that machine parts for aerospace trying to get into automotive. Companies fabricating parts for Ag looking to make parts for energy OEM’s. There were lots and lots of these strategies crashing and burning early in the recent recession as manufacturers looked to find other outlets for their capacity when sales dropped off in their primary market.

Mostly, though, they missed the point that a different market means a different value proposition. What is value adding and what is waste for a big company buyer of Cisco network technology is different from the definitions of value and waste for the guy who goes to Walmart to buy a wireless contraption for his house. And different value propositions mean different management infra-structures – different supply chain processes, different quality systems and thinking, different metrics, different organizational structure.

The companies that succeed – John Deere, for instance, selling big, expensive equipment into the Ag market branching out into lawn mowers for consumers – succeeded by creating an entirely different management concept. The fundamental supply chain, quality, engineering and operating management approach is different for each market. Failure, on the other hand, results from one-size-fits-all management.

I have no idea what Cisco knew or did not know, but the proof that B/BW missed the point lies in the statement “consumer electronics businesses operate on razor-thin margins.” Apple hardly operates on “razor thin margins” and they are most certainly a consumer electronics company. Now I don’t advocate anyone operating by Apple’s skewed management approach, but they are proof-positive that there is nothing inherent to the consumer electronics business that makes it less profitable than any other business.

In fact, when they say ‘razor thin margins’ they mean the gap between selling prices per unit and standard costs – an utterly meaningless ratio. There is nothing razor thin about the overall profitability of lots of companies making and selling consumer products in the United States. Those companies, however, understand what creates value in the consumer market, and what doesn’t.

The bottom line: The right management structure and processes for any company are a function of its customers, and how those customers define value. Attempting to create maximum value for two radically different sorts of customers with one, standard management infrastructure won’t work, no matter how much effort the management experts and schools put into searching for the Holy Grail of the ‘one best’ way to manage.

I have always thought that you could tell an awful lot about a company’s values, culture and leadership by what happens in the weeks running up to the holidays. If the company is near the average make-up of the US population, more than 3/4 of the employees are practicing Christians or Jews, which means the holidays are pretty important to them. 100% of them are fathers, mothers, sons, daughters, grandmothers or grandfathers, which means the holidays may be an even bigger deal to them.

At Barry-Wehmiller, a great lean company under a great lean leader, Bob Chapman, they “take pride in the family environment we create within the walls of Barry-Wehmiller and in the ways the environment extends beyond our walls“. Anything that important to the families of their employees is pretty important to the leaders of the company.

Greg Wahl is spending the week individually meeting with every one of their many hundreds of employees, wishing each a Merry Christmas, and giving each of them boxes of meat, cheese, fruit and a couple of extra days off. Again, anything so important to the people who work at Wahl is very important to the man whose name is on the building.

And then there are the countless companies and their leaders who operate at the other extreme. No point in naming any of them. Paid days off are acknowledgement of the holidays enough for them.

So, read the following and see which best approximates the view of your company and its leadership:

At length the hour of shutting up the counting-house arrived. With an ill-will Scrooge dismounted from his stool, and tacitly admitted the fact to the expectant clerk in the Tank, who instantly snuffed his candle out, and put on his hat.

“You’ll want all day tomorrow, I suppose?” said Scrooge.

“If quite convenient, Sir.”

“It’s not convenient,” said Scrooge, “and it’s not fair. If I was to stop half-a-crown for it, you’d think yourself ill-used, I ‘ll be bound?”

The clerk smiled faintly.

“And yet,” said Scrooge, “you don’t think me ill-used, when I pay a day’s wages for no work.”

The clerk observed that it was only once a year.

“A poor excuse for picking a man’s pocket every twenty-fifth of December!” said Scrooge, buttoning his great-coat to the chin. “But I suppose you must have the whole day. Be here all the earlier next morning!”

’Yo ho, my boys!’ said Fezziwig. ‘No more work to-night. Christmas Eve, Dick. Christmas, Ebenezer! Let’s have the shutters up,’ cried old Fezziwig, with a sharp clap of his hands, ‘before a man can say Jack Robinson!’

You wouldn’t believe how those two fellows went at it. They charged into the street with the shutters-one, two, three-had them up in their places-four, five, six-barred them and pinned then-seven, eight, nine-and came back before you could have got to twelve, panting like race-horses.

‘Hilli-ho!’ cried old Fezziwig, skipping down from the high desk, with wonderful agility. ‘Clear away, my lads, and let’s have lots of room here! Hilli-ho, Dick! Chirrup, Ebenezer!’

Clear away! There was nothing they wouldn’t have cleared away, or couldn’t have cleared away, with old Fezziwig looking on. It was done in a minute. Every movable was packed off, as if it were dismissed from public life for evermore; the floor was swept and watered, the lamps were trimmed, fuel was heaped upon the fire; and the warehouse was as snug, and warm, and dry, and bright a ball-room, as you would desire to see upon a winter’s night.

In came a fiddler with a music-book, and went up to the lofty desk, and made an orchestra of it, and tuned like fifty stomach-aches. In came Mrs Fezziwig, one vast substantial smile. In came the three Miss Fezziwigs, beaming and lovable. In came the six young followers whose hearts they broke. In came all the young men and women employed in the business. In came the housemaid, with her cousin, the baker. In came the cook, with her brother’s particular friend, the milkman. In came the boy from over the way, who was suspected of not having board enough from his master; trying to hide himself behind the girl from next door but one, who was proved to have had her ears pulled by her mistress. In they all came, one after nother; some shyly, some boldly, some gracefully, some awkwardly, some pushing, some pulling; in they all came, anyhow and everyhow. Away they all went, twenty couple at once; hands half round and back again the other way; down the middle and up again; round and round in various stages of affectionate grouping; old top couple always turning up in the wrong place; new top couple starting off again, as soon as they got there; all top couples at last, and not a bottom one to help them. When this result was brought about, old Fezziwig, clapping his hands to stop the dance, cried out, ‘Well done.’

Bob Chapman and Greg Wahl would have liked old Fezziwig. Like them, I think Fezziwig would have made a great lean leader.